April 18, 2007	Wednesday	Rabi-ul-Awwal 29, 1428

PARIS: French presidential hopefuls are promising to build Fortress France, regardless of whether their ideas for safeguarding jobs, firms and industries would be feasible, let alone benefit the economy.

As huge French firms rove the world seeking takeover targets and cheap foreign goods make French voters’ money go further, presidential candidates from all sides are pledging to turn back the tide of globalisation.

That is in the tradition of a country where the ruling right has spent the past five years protesting against a strong euro, saving high-profile firms from collapse, and promoting “economic patriotism” — fending off unwanted foreign bids on French firms.

Election campaign promises for more intervention are even less surprising given France is one of the rare countries where a majority believes the free market is not the best system.

France is not alone in trying to shield workers and firms from the rising job insecurity generated by the free movement of capital, goods or services. The United States, Spain, and Poland have also intervened to try to protect key firms or sectors.

But while France was the third biggest recipient of inward foreign direct investment in the world in 2006, large French firms have until recently rarely been takeover targets and its politicians’ strident talk definitely stands out, analysts said.

“The position in France is more explicit and the government does not hide its protectionist inclinations while in other countries it is more subtle,” said Juan Delgado, research fellow at Bruegel think-tank in Brussels.”

“Sometimes there is a success story but the effectiveness of protectionist policies in the medium- to long-term is limited.

The risk is that if you keep industry artificially isolated from international markets, it will become less competitive.”

MISTRUST OF FREE MARKET: Recent polls show France is the only major developed or developing country where a majority of people feel they suffer more than they benefit from freer trade or believe that free enterprise and free markets are not the best economic model.

Wooing such voters means even those who previously promoted themselves as reformers have toned down such themes.

Segolene Royal presented herself as a breath of fresh air when contesting primaries against Socialist heavyweights but has since largely lifted the party’s traditional leftist programme.

She wants to tax firms more if they pay dividends rather than reinvesting profits and make state aid conditional on firms not shedding staff or re-locating abroad when they make profits.

“The left is still attracted by the notion that France has a God-given right to fight markets and that the Socialists are the apostles,” Pascal Boris, president of the French Chamber of Commerce in Great Britain, told reporters.

However, even Sarkozy — viewed by financial markets as more pro-reform than Royal — is hardly a fan of free markets.

Like Royal, he wants to see firms which quit France after receiving subsidies to reimburse the money. He also intends to look into giving more favourable tax treatment for products made in France rather than abroad.

Centrist Francois Bayrou, who rattled the two front-runners with his ascent in the polls earlier this year, is no less willing to preach interventionist policies on some issues.

Like Royal and Sarkozy, he has criticised “golden parachutes” for company bosses and wants to defend French industry.

NOT JUST TALK: Nor is such rhetoric just an election tactic.

During his brief tenure as finance minister in 2004, Sarkozy played a key role in taking on the European Commission over a bailout that saved engineering firm Alstom from collapse.

He was also part of Prime Minister Dominique de Villepin’s government which tried, but failed to stop India’s Mittal Steel from buying Arcelor and which brokered merger plans between utility firm Suez and Gaz de France to freeze out Italy’s Enel.

Sarkozy promises more such “pragmatism” and not all French firms are unhappy at the idea.

“We got state support because the French financial system does not provide the equivalent tools that exist in other countries, such as Chapter 11, so there is no way to restructure without bankruptcy,” Alstom chief Patrick Kron said.

But this is not enough to convince analysts that such intervention is for the greater good.

“France can’t stop globalisation and the opening of borders, given this is a European Union policy,” said Laurence Boone, European economist at Barclays Capital in Paris.

“This will not help solve the internal problems and we will

have to face up to competitiveness problems at some stage.”

—Reuters